How to manage your finances when living overseas?

  • managing finances
Published on 2023-03-17 at 10:00 by Natallia Slimani
According to a recent survey by HSBC, 45% of people planning to relocate to a new country feel lost about managing their finances after the move. This is an understandable concern: banking, paying taxes and transferring money between countries can be complicated. Below, we will look into the details of the HSBC survey and suggest an effective action plan for managing finances when moving abroad.

HSBC Relocation Study: Details

HSBC's survey of 7,000 expats and prospective expatriates discovered that despite the excitement of moving and working abroad, many individuals perceive the financial aspect of relocation as stressful.

  • 46% anticipate facing a cash flow crisis upon arrival
  • 45% have no plan for managing their finances during the transition
  • 60% are worried about the consequences of paying taxes in a new country
  • 53% experienced a sense of unease upon arrival as they faced difficulties in setting up crucial services such as a bank account, utilities, and the internet

In short, the study revealed that individuals often encounter financial issues that can significantly affect their ability to settle into their new surroundings.

What to consider before moving to a foreign country in terms of finances

Moving to a new country can be an exciting experience, but it can also be a challenging one, especially when it comes to managing your finances. To help you prepare for your move, here is a basic checklist:

  • Research the cost of living in your destination country: Knowing how much you will need to spend on rent, food, transportation, and other basic expenses is crucial to determine your budget and adjusting your lifestyle accordingly.
  • Check if you need a visa or a work permit: Before moving to a new country, make sure you have the right documents to enter and work legally in the country. Visa and work permit requirements can vary depending on your nationality and the country you're moving to.
  • Find out what documents you need to open a bank account.
  • Research tax laws: Tax laws vary by country, and it's important to understand the implications of relocating on your tax situation. Seek advice from a tax professional to help you navigate the tax system.
  • Plan your currency exchange: If you need to exchange currency, research the best exchange rates and fees, and consider using a foreign exchange specialist to save money.
  • Set up a budget: Create a budget that takes into account your new cost of living and your income in your new country.

By taking these steps before your move, you can make the transition to a new country smoother and less stressful.

A comprehensive financial action plan for moving to a new country

Managing your finances in a new country can be complicated. From setting up a bank account and navigating the tax system to understanding the cost of living and establishing a credit history, there are many financial steps to take.

Having an action plan in mind can make you feel substantially less stressed and help you move forward with arranging your finances.

Open a bank account

Opening a bank account in a foreign country can be a bit of a challenge, but it's an important step to managing your finances and making the most of your time abroad. Here's a good place to start:

Research banks: Before you move to your new country, research banks and financial institutions that operate in the area. Consider using an international bank with branches in both your home and expat countries. They can provide convenient services such as online banking and easy money transfers.

Check online banking options: Visiting a bank in a foreign country (especially if you don't speak the language) can be challenging. This is why it is always best to choose a bank with strong online support so that you can keep your bank visits to a minimum. Make sure your bank's mobile application is also available in English and is easy to navigate.

Gather required documents: You'll need to gather the necessary documents to open a bank account, which can vary depending on the country and the bank. Common documents include your passport, visa, proof of address, and proof of income. Note that proof of address generally requires having mail or utility bills in your name sent to your new address.

Visit a bank branch: Once you've gathered the necessary documents, visit a bank branch in person to open your account. Some banks may allow you to open an account online, but it's best to visit a branch in person if possible. This way, you will be able to settle any concerns you may have on the spot.

Fill out the application form: Fill out the bank's application form and provide the required documents. The bank may also require you to provide a reference letter from your employer or a current bank.

Make a deposit: Some banks may require an initial deposit to open an account. Be sure to ask about any fees associated with opening and maintaining your account.

Activate your account: Once your account is opened, you may need to activate it by using a debit card or making a transaction.

Set up online banking: Many banks offer online banking, which can be useful for managing your account remotely. Be sure to set up online banking and familiarize yourself with the bank's mobile app or online platform.

Transfer your funds

If you have savings or investments in your home country, consider transferring them to your expat country. This will help you avoid high transaction fees and make it easier to manage your finances.

Research transfer options: Research different transfer options such as bank transfers, wire transfers, and online money transfer services. Compare each option's exchange rates and fees to find the most affordable and convenient option for you.

Consider transfer fees: Consider the fees associated with the transfer, including exchange fees, transfer fees, and any other fees that may apply. Be sure to factor in these costs when deciding on a transfer method.

Track your transfer: Once you've transferred your money, track the transfer to ensure it arrives safely and on time. Consider using a tracking service or contacting your bank to confirm the transfer.

Research tax implications

Failing to understand the tax system in your new country could result in unexpected tax bills or penalties. Additionally, you may be required to file tax returns in both your home country and your new country. Consider taking the following steps:

  • Firstly, notify your local tax authority of your intention to move.
  • Secondly, research the tax system in your new country, including any double-tax agreements that may apply to you.
  • Thirdly, determine whether you'll need to pay capital gains tax on existing properties or assets in both your home country and your new country.
  • Finally, if you need advice, consider contacting a qualified tax planning expert.

Get health insurance

Make sure you have health insurance coverage in your new country. If your employer does not provide coverage, research private insurance options. Here are some steps to follow:

Research health insurance options: Research health insurance options in your new country, including private insurance and government-funded plans. Consider the benefits, costs, and coverage limits of each option.

Determine eligibility: Determine your eligibility for health insurance in your new country. Some countries may require proof of residency or employment to qualify for health insurance.

Apply for coverage: Once you've determined your eligibility, apply for health insurance coverage. Follow the instructions for the application process and provide any necessary documents, such as proof of identity, residency, or employment.

Consider additional coverage: Consider additional coverage, such as dental or vision insurance, if it's not included in your health insurance plan.

Plan for emergencies

Make sure you have an emergency fund to cover unexpected expenses, such as medical bills or job loss.

Build an emergency fund: Build an emergency fund by setting aside money regularly. Aim to save at least three to six months' worth of living expenses.

Understand your insurance coverage: Make sure you understand your insurance coverage, including health, home, and auto insurance. Consider adding additional coverage if necessary.

Keep emergency cash: Keep some emergency cash in a secure location in case you lose your wallet or encounter an unexpected expense that can't be paid for by credit card.

Have a plan for accessing funds: Have a plan for accessing funds in case of emergency, such as setting up an international bank account, carrying a debit or credit card that works internationally, or setting up a money transfer service.

Plan for retirement

Research retirement plans and options in your new country. Consider contributing to a retirement account to ensure financial security in the future.

Research retirement plans: Research retirement plans and options in your new country, including government-funded plans, private pensions, and retirement savings accounts.

Set retirement goals: Set retirement goals based on your lifestyle and financial needs. Consider factors such as healthcare costs, travel expenses, and other retirement expenses.

Create a retirement budget: Create a retirement budget that takes into account your new cost of living, income, and retirement savings. Consider using a retirement calculator to help you estimate your retirement expenses.

Maximize retirement savings: Maximize your retirement savings by contributing the maximum amount allowed to your retirement accounts each year. Consider setting up automatic contributions to make saving easier.

Seek financial advice: Seek the advice of a financial advisor or retirement planner specializing in expat finances. They can help you navigate the complexities of retirement planning in a foreign country.

In summary

Managing finances when moving abroad can be daunting, but with careful planning and preparation, it can be a manageable process. From creating a budget and setting up a bank account to transferring funds and planning for retirement, there are several important steps to take when moving to a new country.

It's important to research your options and seek professional advice to ensure you're making informed financial decisions that align with your goals and lifestyle. By following the steps outlined in this article, you can establish a solid financial foundation for your new life abroad and enjoy all the benefits that come with living in a new country.